REAL ESTATE TERMS THAT A BROKER MUST BE SURE THAT A BUYER UNDERTSTANDS

REAL ESTATE TERMS THAT A BROKER MUST BE SURE THAT A BUYER UNDERTSTANDS

When dealing with clients in Real Estate transactions we as Real Estate Brokers sometimes take it for granted that buyers understand some of the basic terms involved. What we need to understand is that for us that deal with it everyday it is a fundamental term but for our clients, who are involved with Real Estate so infrequently, they are not fundamental.

I am going to touch on the 4 biggest terms that could be misunderstood by buyers that I have seen in my practice, are there more, of course. Buyers should be working with Brokers that will take the time and go step by step through the total transaction, my company works on the education of our clients so they are in position that they can make decisions instead of a Broker telling them what to do.


AGENT:
So lets start with the most fundamental of terms Agency and Agent which is the foundation of the relationship between a Realtor and the buyer. I will not go into the differences between an Agent and a Broker other then to say the Agent cannot operate without reporting to a Broker and that the Broker has far more rigorous schooling and testing then an Agent. You should always give a buyers presentation even if it is a given that this buyer will be working with you. Go through all your duties as an agent/broker along with what a fiduciary responsibility means. 

PRE-APPROVAL:
Now this is the one that everyone gets wrong and can be the straw that breaks the camels back right at the same time you are closing escrow. Pre approval simply means that at that point in time with what the buyer has presented to the financial institution, if nothing else turns up that the bank deems detrimental or anything said that is not 100% accurate then they may be in a position to offer a loan. As you can see it doesn't mean much. What is does mean is that preliminary information says that your buyer should qualify for a loan. As the owner and Broker for West Los Angeles Real Estate Group, when I get the pre-approval letter I speak to the banker or mortgage broker and go over all details of the approval and then review with the client, pointing out clearly that the last say is done by the underwriter who usually does not pick up the file until a week before closing. 

COMPARATIVE PROPERTY ANALYSIS OR "COMPS"
Here is another term that is very misunderstood especially with the likes of Trulia & Zillow, there value is based on algorithms with no one looking at the house as they give there value estimate or Comp.  Buyers seem to think that when we see a house that they like and I run the "comps" in the neighborhood, that the price i feel the comps point to should be what the bank appraiser, comes up with. NOT !!! The bank is sending an appraiser in, that sometimes is not even familiar with the area, to let the bank know it is safe, from a value point of view to make the loan. You think this appraiser will be a little conservative, of course. In todays multiple offer atmosphere, buyers are sometimes releasing there appraisal contingency to win the property  DON'T.  It is the sellers issue to make sure the house is appraised at the price it is sold. In my practice as the buyers agent I always attend the appraisal so I can see first hand what is happening not hear it from the listing agent.

GOOD FAITH ESTIMATE
You would think the term itself would relay what the meaning is but it is important that the buyer understands that it is an estimate only and can vary considerably as the transaction progresses and other costs come up. Buyers when planning all there costs and what they need to come up with to close should pad this estimate to cover the bump up from estimate to actual. Your broker should sit with you and go over each line item in the estimate and explain how they came up with it and what could change.

                Robert Schmalz
    California Broker Lic #01813025
West LA Real Estate Group / Rodeo Realty
                 310.505.5571
  11940 San Vicente Blvd Suite #100
          Los Angeles, CA 90049

    www.WestLARealEstateGroup.com
 
Serving all of Santa Monica, Brentwood CA, 
Pacific Palisades and West Los Angeles

                          
       CLICK TO SEARCH THE MLS
 
 


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Phone: 310-505-5571
Dated: October 2nd 2014
Views: 384
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